National Storage Affiliates Trust

Storage Affiliates, fourth quarter 2023 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Hoagland, Vice President of Investor Relations for National Storage Affiliates. Thank you, Mr. Hoagland. You may begin.

We'd like to thank you for joining us today for the fourth quarter 2023 Earnings Conference Call of National Storage Affiliates Trust. On the line with me here today are NSA's President and CEO, Dave Kramer, and CFO, Brandon Tagashi. Following prepared remarks, management will accept questions from registered financial analysts. Please limit your questions to one question and one follow-up, and then return to the queue if you have more questions. In addition to the press release distributed yesterday afternoon, we furnished our supplemental package with additional detail on our results, which may be found in the investor relations section on our website at nationalstorageaffiliates.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties and represent management's estimates as of today, February 29, 2024. The company assumes no obligation to revise or update any forward-looking statement because of changing market conditions or other circumstances after the date of this conference call. The company cautions that actual results differ materially from those projected in any forward-looking statement. For additional details concerning our forward-looking statements, please refer to our public filings with the SEC. We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures such as FFO, or FFO, and net operating income contained in the supplemental information package available in the investor relations section on our website and in our SEC filings. I will now turn the call over to Dave.

Thanks, George, and thanks, everyone, for joining our call today. Fourth quarter capped off a busy year here at NSA. We made significant progress in our people, process, and platform initiatives. I'm very pleased with all that we've accomplished in 2023 to strategically position us for the next phase of growth. On the people front, we made a handful of key moves to enhance our team, including hiring Will Cowan to join NSA in June as Chief Strategy Officer. Will's hiring is notable as he is leading our portfolio optimization plan, which includes asset sales and joint venture transactions, and as detailed in our release, we've been busy. We invested in additional talent in many areas, including our data science and customer acquisitions teams. Teams focus on enhancing our processes through utilization of artificial intelligence and machine learning in our revenue management models. This has improved our customer rate decisions and elevated our intelligence in paid marketing and front-end pricing models. We also invested in new and upgraded platforms in 2023, including a new property management system, data warehouse, and customer web platform. These upgrades position us to have enhanced intelligence, a better customer experience, increased conversion rates, facilitate more sophisticated revenue management and marketing strategies. Needless to say, I'm very proud of what our team accomplished in 2023, and they worked diligently to position NSA to deliver enhanced growth over the long term. Turning to operations for the quarter, there were several puts and takes in the fourth quarter, but on the whole, the quarter played out modestly better than our expectations. Teams focused on balancing rate and occupancy to maximize revenue, but we remained focused on expense control. Quarter remain challenging on an asking rate front. Competition for new customers remains high, especially in markets where we also have supply pressures. Our improvements in team and technology are certainly aiding us in navigating the challenging environment. Our existing customer base remains healthy, but is likely to stay above historical averages. Continued ability to implement ECRIs is allowing stability in achieved rate while we wait for demand conditions to improve. Keep in mind that the seasonal profit rates and occupancy tends to occur in the first couple of months of the year, and we're seeing evidence that February likely ends up being the bottom. Lastly, looking at our different markets, the Sunbelt is currently facing demand challenges due to muted housing markets and new supply, with MSAs like Phoenix, Sarasota, and Las Vegas all performing below portfolio average. Longer term, we remain very confident in the growth prospects of our Sunbelt markets due to the broader population and migration trends. Now turning to our portfolio optimization strategies, we had a very busy fourth quarter and a start to the new year, including the following. First, we sold a portfolio of 71 properties to a large private storage operator for a gross price of $540 million. The sales straddled Deer Inn with half of the portfolio closing in December and all but one of the remaining properties closed in February. The portfolio consisted of assets that were generally smaller than our portfolio average, with lower margins, and were geographically less concentrated. The assets and markets also generally had lower growth prospects than our portfolio. As such, the sale enhanced operational efficiencies, improves our long-term growth prospects, and generates capital for our balance sheet initiatives. Second, we contributed 56 assets, totaling almost $350 million, to a newly formed joint venture in February with one of our existing JV partners. We chose these properties because they had revenue-enhancing opportunities that we felt were best unlocked off balance sheet in a joint venture structure. We've retained a 25% interest in this JV and the right of first offer on the assets. These are assets and markets that we want to own long-term, so we maintain the flexibility to bring these assets back on balance sheet in the future. Third, we also formed a new joint venture with an existing partner. JV has 400 million of total capital commitments with a maximum allowed leverage of up to 60%, which implies up to 1 billion of buying power. This JV provides additional growth capital to take advantage of acquisition opportunities that we think will start to materialize in 2024 and into 2025. And last, we raised $250 million of capital through a debt private placement. By completing these activities, we were able to repay our entire revolver balance and eliminate all of our exposure to floating rate debt. Also bought back $27 million of common shares in the fourth quarter and an additional $93 million year-to-date. We've delivered on what we've been messaging over the past few quarters. Net impact of these transactions are reduced risk, better portfolio concentration and quality, improved operational efficiencies, reduced share count to enhance FFO growth going forward, and generation of investment capital and dry powder for future acquisitions. In short, we've strategically and significantly improved our balance sheet position on enhancing our growth prospects over the long term. I'll turn the call over to Brandon to discuss our financial results.